Matter of New York Diet Drug Litig.

Matter of New York Diet Drug Litig. 2017 NY Slip Op 07945 Decided on November 14, 2017 Appellate Division, First Department Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and subject to revision before publication in the Official Reports.

Decided on November 14, 2017
Friedman, J.P., Kapnick, Webber, Gesmer, Oing, JJ.
105122/09 -160946/14 4926 653434/14 4925 4924

[*1]In re New York Diet Drug Litigation

Clara Appel-Hole, et al., Plaintiffs,

v

Wyeth-Ayerst Laboratories, et al., Defendants.



Ella Abramova, et al., Intervenor Plaintiffs,

v

Paul J. Napoli, et al., Intervenor Defendants.



Paul J. Napoli, et al., Third-Party Plaintiffs-Respondents,

v

Parker Waichman, et al., Third-Party Defendants-Appellants.



In re: New York Diet Drug Litigation

Clara Appel-Hole, et al., Plaintiffs,

v

Wyeth-Ayerst Laboratories, et al., Defendants.



Sherrie Antrum-Perry, et al., Intervenor Plaintiffs,

v

Paul J. Napoli, et al., Intervenor Defendants.



Paul J. Napoli, et al., Third-Party Plaintiffs-Respondents, [*2]

v

Parker Waichman, et al., Third-Party Defendants-Appellants.



In re: New York Diet Drug Litigation

Clara Appel-Hole, et al., Plaintiffs,

v

Wyeth-Ayerst Laboratories, et al., Defendants.



John M. McDonnell as Chapter 7 Trustee for the Bankruptcy Estate of Cynthia Altini and John Altini, Intervenor Plaintiff,

v

Paul J. Napoli, et al., Intervenor Defendants.



Paul J. Napoli, et al., Third-Party Plaintiffs-Respondents,

v

Parker Waichman, et al., Third-Party Defendants-Appellants.

Rivkin Radler LLP, Uniondale (Merril S. Biscone of counsel), for appellants.

Paul, Weiss, Rifkind, Wharton & Garrison LLP, New York (Eric Alan Stone of counsel), for Paul J. Napoli, Napoli Kaiser & Associates, LLP, Napoli Kaiser Bern, LLP, Napoli Kaiser Bern & Associates LLP and Napoli Kaiser & Bern, P.C., respondents.

Ropers Majeski Kohn & Bentley PC, New York (Christopher B. Hitchcock of counsel), for Marc J. Bern and Law Offices of Marc Jay Bern, P.C., respondents.

Orders, Supreme Court, New York County (Charles E. Ramos, J.), entered February 16, 2016 and February 19, 2016, which, to the extent appealed from, denied third-party defendants' motions to dismiss the third-party claims for contribution based on liability for common-law fraud, unanimously reversed, on the law, with costs, and the motions granted.

Intervenor plaintiffs in each of these three actions were the plaintiffs in the New York Diet Drug Litigation. They were represented in the litigation by intervenor defendants/third-party plaintiffs, who negotiated settlements (settling counsel). They had been referred to settling counsel by third-party defendants (referring counsel). Intervenor plaintiffs allege that settling counsel engaged in common-law fraud in allocating costs and settlement amounts as between their direct and referred clients. Settling counsel asserted third-party claims for contribution, alleging that referring counsel failed to object to any of the settlements despite scrutinizing each one closely to determine whether it was fair and reasonable.

To succeed on their fraud claims, intervenor plaintiffs must demonstrate that they were justified in relying on settling counsel's alleged misrepresentations (Ambac Assur. Corp. v Countrywide Home Loans, Inc., 151 AD3d 83 [1st Dept 2017]). If referring counsel, intervenor plaintiffs' agents, received notice requiring them to take steps to stop the settlements, the notice would be imputed to intervenor plaintiffs, who consequently would be unable to demonstrate justifiable reliance; the defeat of the fraud claim would obviate the claim for contribution based on liability for fraud (see New York Islanders Hockey Club, LLP v Comerica Bank-Texas, 115 F Supp 2d 348, 351-352 [ED NY 2000] [dismissing third-party claim for contribution "where the claim essentially duplicate(d) an element of the plaintiff's own cause of action"]). Contrary to settling counsel's contention, the third-party complaints do not allege facts from which it could be inferred that referring counsel were acting outside the scope of their representation or had totally abandoned intervenor plaintiffs' interests with regard to the settlements (see Kirschner v KPMG LLP, 15 NY3d 446, 466-467 [2010]).

THIS CONSTITUTES THE DECISION AND ORDER

OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.

ENTERED: NOVEMBER 14, 2017

CLERK